A terminally ill man has won the right to launch a landmark legal challenge to the government over its introduction of universal credit after the controversial new benefits system left him significantly worse off.

The 52-year-old, known only as TP, a Cambridge graduate who once worked in the City, has non-Hodgkin lymphoma and the rare lymph node condition Castleman disease. Following a successful hearing last week, a full judicial review of his claim will take place next month, the first high court challenge of its kind.

The outcome could have consequences for thousands of other disabled people who claim that they are now experiencing financial hardship as a result of having had their benefits restricted under universal credit.

“I am proceeding with the judicial review for my own personal financial situation during this very difficult time of illness, but also because it is quite wrong of the government to remove by stealth and without prior warning on a transition into universal credit a much-needed benefit for people trying to cope alone at home with a substantial disability,” TP told the Observer. “This includes the most very vulnerable of society. It piles on a financial burden at a time when these people are most in need of assistance to continue their day-to-day lives as best they can.”

TP became terminally ill in 2016 and received the severe disability premium (SDP) and enhanced disability premium (EDP), which were set up to meet the needs of severely disabled people living alone without carers.

Quick guide

What is universal credit and what are the problems?

What is universal credit?

Universal credit (UC) is the supposed flagship reform of the benefits system, rolling together six benefits (including unemployment and benefits, and tax credits) into one, online-only system. The theoretical aim, for which there was general support across the political spectrum, was to simplify the system and increase the incentives for people to move off benefits into work.

The original design set out a minimum 42-day wait for a first payment to claimants when they moved to UC (in practice this is often up to 60 days). After sustained pressure, the government announced in the autumn 2017 budget that the wait would be reduced to 35 days from February 2018. This will partially mitigate the impact on many claimants of having no income for six weeks. The wait has led to rent arrears and evictions, hunger (food banks in UC areas report notable increases in referrals), use of expensive credit and mental distress.

Ministers have expanded the availability of hardship loans (now repayable over a year) to help new claimants while they wait for payment. Housing benefit will now continue for an extra two weeks after the start of a UC claim. However, critics say the five-week wait is still too long and want it reduced to two or three weeks.

Are there other problems?

Plenty. Multibillion-pound cuts to work allowances imposed by the former chancellor George Osborne mean UC is far less generous than originally envisaged. According to the Resolution Foundation thinktank, about 2.5m low-income working households will be more than £1,000 a year worse off when they move to UC, reducing work incentives.

Landlords are worried that the level of rent arrears accrued by tenants on UC could lead to a rise in evictions. It's also not very user-friendly: claimants complain the system is complex, unreliable and difficult to manage, particularly if you have no internet access.

And there is concern that UC cannot deliver key promises: a critical study found it does not deliver savings, cannot prove it gets more people into work, and has plunged vulnerable claimants into hardship.

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Following the introduction of universal credit (UC), both benefits for TP were removed, despite a government pledge that no one with a severe disability would be financially worse off. According to the charity Disability Rights UK, the abolition of SDP will cost disabled adults with no one to care for them, or with only a young carer, about £62.45 per week, or £3,247.40 a year. The abolition of EDP will cost them £15.90 per week or £826.80 a year.

Following his diagnosis, TP’s doctors recommended that he move to London to receive treatment. His return to the capital, a universal credit full-service area, led to a reduction in his benefits which, say his lawyers, has resulted in their client being £178 a month worse off. They contend that the government’s decision to introduce the single benefit, while removing his disability benefits, has left TP in financial difficulties, which have had a major impact on him at a time of extreme ill health and stress.

Tessa Gregory from the law firm Leigh Day, which is representing TP, said David Gauke, the former work and pensions secretary, had made repeated commitments to protect existing benefit levels with “top-up payments” for claimants moving to UC. Gauke had pledged: “No one will experience a reduction in the benefit they are receiving at the point of migration to universal credit where circumstances remain the same.” But both the work and pensions select committee and the House of Lords secondary legislation scrutiny committee have concerns that disabled people could miss out on benefits, with no top-up payments planned until July 2019. “We believe that by taking away these essential benefits for some of the most vulnerable people in society, the government has acted unlawfully,” Gregory said.

A DWP spokeswoman said that it was unable to comment on the specifics of the case while the review was under way. She added: “We are committed to supporting people into work while making sure the right care is in place for those that cannot. Unlike the previous system, universal credit is more targeted and support is focused on those who need it most. Transitional protection is also available for those people who move on to UC from other benefits, provided their circumstances stay the same.”